In Li v. Merck & Co., Inc., No. 23-cv-03347-JSW (TSH) (N.D. Cal. July 30, 2025), California Magistrate Judge Thomas S. Hixson found that plaintiff’s duty to preserve arose when she was terminated, rendering moot most of defendant’s request for spoliation sanctions. However, Judge Hixson did grant defendant’s request for Rule 26 sanctions, finding “that the attorney that signed the October 21, 2024 discovery responses violated Rule 26 and should be sanctioned”. So, he ordered plaintiff’s attorney to pay $5,000 within 30 days.

Case Discussion and Judge’s Ruling

In this case, Defendants sought a permissible adverse inference instruction pursuant to the Court’s inherent authority (which governs non-ESI sanctions) that Plaintiff deleted three categories of paper documents: (1) pen and paper edits by Plaintiff and her daughter, which Plaintiff admitted had been thrown away; (2) documents Plaintiff printed and removed from Merck within the last 90 days of her employment; and (3) documents Plaintiff solicited from a current Merck employee after her termination, which were mailed to her.

Defendants also sought two alternative sanctions pursuant to Rule 37(e), resulting from Plaintiff’s alleged deletion and failure to preserve communications between herself and third parties, as well as Rule 26 sanctions against Plaintiff’s counsel in the amount of $5,000, for certifying a discovery response without conducting a reasonable inquiry.

As for the inherent power sanctions, a major dispute between the parties was when Plaintiff anticipated litigation and thus had a duty to preserve. Merck said Plaintiff anticipated litigation no later than December 2022, but Plaintiff said she did not contemplate suing Merck until she was fired in March 2023 and escorted out of the building by security.

Judge Hixson stated: “The Court thinks Plaintiff has the better of the argument. By December 2022, Plaintiff had an HR dispute within Merck, but there is no indication she was thinking of suing the company. In December 2022, Plaintiff’s daughter, Grace Chen, texted Plaintiff a link to a lawyer referral service in Alameda County…And Plaintiff did consult with a lawyer at the time…When asked ‘Do you know when your mother first started thinking about filing a lawsuit against Merck?’ Chen answered: ‘I believe we talked about her filing a lawsuit after she was fired and felt that she was wrongfully terminated.’”

Continuing, he said: “Plaintiff similarly testified that she consulted with a lawyer in December 2022 because ‘I just wanted to find out why I was treated the way I’m being treated, whether it’s legal or illegal… Despite several attorneys offering their litigation services, I declined because I was not interested in litigation at the time. I continued to reach out to HR and the OOE for assistance until my termination.’… Merck tries to spin Plaintiff’s consultation with a lawyer in December 2022 as though she had ‘lawyered up’ at that point. But that’s not true. She did not retain counsel until after she was fired… There is no mention of litigation or potential litigation by Plaintiff before she was fired, not even in texts or emails with colleagues or family members. She turned down legal representation she was offered. It doesn’t seem like she was contemplating a lawsuit until she was fired. Accordingly, the Court finds that Plaintiff’s duty to preserve arose when she was terminated.”

As a result, Judge Hixson stated: “The Court’s conclusion regarding the date when Plaintiff’s duty to preserve arose renders moot two thirds of the inherent power motion”, noting “For these two sets of documents, Merck does not make the argument that Plaintiff threw them away after she was terminated. Nor does Merck put forth any evidence to show that’s when they were destroyed. Rather, Merck’s spoliation argument hinges on the duty to preserve having started in December 2022. As the Court does not find that the duty to preserve arose pre-termination, the Court rejects Merck’s spoliation argument for these two sets of documents.” As for the third set of documents, Judge Hixson stated: “Even if Plaintiff threw out the printed emails that Shen mailed her in violation of her duty to preserve, Merck was not deprived of any documents or any relevant information. There would therefore be no basis for sanctions.”

As for Rule 37(e) sanctions, while Judge Hixson acknowledged “The Court has already found that Plaintiff’s document production was ‘a complete mess’”, but he also noted “The Court thinks that on the current record, Merck cannot show there is ESI that has been lost and that cannot be restored or replaced through additional discovery… The gating item under Rule 37(e) is lost ESI that can’t be restored or replaced, and Merck ultimately came up empty.”

As for sanctions under Rule 26, Judge Hixson stated: “Everyone agrees that discovery response was false. And Plaintiff’s counsel knew it was false by at least the beginning of December…Plaintiff’s counsel say they relied on their client, who had forgotten about the electronic communications with her daughter…But there are two problems with that excuse. First, it doesn’t work because Rule 26 doesn’t let counsel hand off responsibility for document collection to the client and then just hope for the best.” But also “Counsel say they did not hand off all responsibility to Plaintiff to search for documents… If Plaintiff’s counsel ran the search they claim they did, they would of course have located responsive communications with Plaintiff’s daughter. This makes it even more indefensible to rely on Plaintiff’s memory of what documents existed in responding to the RFP.” So, he ordered plaintiff’s attorney to pay $5,000 within 30 days.

So, what do you think? Do you agree with the Court on when the duty to preserve arose? Please share any comments you might have or if you’d like to know more about a particular topic.

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